A Brief History of Doom

by Richard Vague

  107. Walter Bagehot, “The Panic,” Economist 24 (May 19, 1866), 581.

  108. “Series Q 23–32—Railroad Passenger and Freight Service: 1865 to 1890,” Historical Statistics of the United States, Colonial Times to 1957 (Washington DC: Government Printing Office, 1960), 428.

  109. Thorstein B. Veblen, “The Price of Wheat Since 1867,” Journal of Political Economy 1 (December 1892), 73–75; National Agricultural Statistics Service, “All Wheat Area Planted and Harvested, Yield, Production, Price, and Value—United States: 1866–2017,” Crop Production Historical Track Records (Washington, DC: U.S. Department of Agriculture, April 2018), 206, https://www.nass.usda.gov/Publications/Todays_Reports/reports/croptr18.pdf.

  110. American Railroad Journal 38–46 (1865–1873); U.S. Bureau of the Census, “Railroads Before 1890—Capital, Property Investment, Income, and Expenses: 1850 to 1890,” in Historical Statistics of the United States, 1789–1945: A Supplement to the Statistical Abstract of the United States (Washington, DC: Government Printing Office, 1949), 201.

  111. Nelson, Nation of Deadbeats, 162; Arthur Arnold, “Russia in Europe,” Fraser’s Magazine n.s. 14 (August 1876), 142. Wheat prices in Chicago doubled during the two years ending in May 1867 and quadrupled over the previous four years. In Britain, wheat prices rose 72.5 percent between January 1864 and January 1868. In fact, the U.S. price reached a record $2.88 per bushel in May 1867, a number not seen again until the latter months of World War I. See NBER, “Wholesale Price of Wheat, Chicago, Six Markets for Chicago, IL,” NBER Macrohistory Database Series 04001, http://www.nber.org/databases/macrohistory/data/04/m04001a.db; and NBER, “Wheat Prices for Great Britain,” NBER Macrohistory Database Series 04002, http://www.nber.org/databases/macrohistory/data/04/m04002.db.

  112. W. G. Langworthy Taylor, “Promotion Before the Trusts,” Journal of Political Economy 12 (June 1904), 386–87.

  113. NBER, “Germany Index of Stock Prices 01/1870–12/1913,” NBER Macrohistory Database Series m11023a, http://www.nber.org/databases/macrohistory/data/11/m11023a.db.

  114. John B. Lyon, Out of Place: German Realism, Displacement and Modernity (New York: Bloomsbury Academic, 2013), 42.

  115. Monika Leopold-Rieks, Ein Viertel in Bewegung: Hausbesitz, Mobilität und Wohnverhalten in der suedlichen Vorstadt Bremens zwischen 1875 und 1914 (Frankfurt: Peter Lang, 1998), 110.

  116. Sebastian Kohl, “Homeowner Nations or Nations of Tenants: How Historical Institutions in Urban Politics, Housing Finance and Construction Set Germany, France and the US on Different Housing Paths” (PhD dissertation, University of Cologne, 2014), 76, https://kups.ub.uni-koeln.de/6161/1/Diss-final-deutsch2.pdf.

  117. Taylor, “Promotion Before the Trusts,” 386–87.

  118. Kilian Rieder, “A Historic(al) Run on Repo? Causes of Bank Distress During the Austro-Hungarian ‘Grunderkrach’ of 1873” (working paper, November 26, 2015), 4, https://www.banque-france.fr/sites/default/files/8-rieder-paper.pdf.

  119. Charles P. Kindleberger, Historical Economics: Art of Science? (Berkeley: University of California Press, 1990), 314.

  120. David C. Goodman and Colin Chant, European Cities and Technology: Industrial to Post-Industrial City (New York: Routledge, 1998), 228.

  121. David Clay Large, Berlin (New York: Basic, 2000), 12.

  122. Albert Boime, Art in an Age of Civil Struggle, 1848–1871 (Chicago: University of Chicago Press, 2007), 795.

  123. Erik F. Gerding, Law, Bubbles, and Financial Regulation (London: Routledge, 2014), 82.

  124. Richard White, Railroaded: The Transcontinentals and the Making of Modern America (New York: W. W. Norton, 2011), 56; Ellis Paxon Oberholtzer, Jay Cooke: Financier of the Civil War, vol. 2 (Philadelphia: George W. Jacobs, 1907), 33–40.

  125. White, Railroaded, 56.

  126. “Issue of £4,000,000 Northern Pacific Railroad First Mortgage Land-Grant Bonds,” Times, January 11, 1872, 10.

  127. White, Railroaded, 77, 272.

  128. Jonathan Levy, Freaks of Fortune: The Emerging World of Capitalism and Risk in America (Cambridge, MA: Harvard University Press, 2014), 141.

  129. Nelson, Nation of Deadbeats, 162.

  130. Ibid., 173.

  131. Jeffrey Fear and Christopher Kobrak, “Origins of German Corporate Governance and Accounting, 1870–1914: Making Capitalism Respectable” (presentation, XIV International Economic History Congress, Session 96–Corporate Governance in Historical Perspective, Helsinki, 2006), 12, http://www.helsinki.fi/iehc2006/papers3/Kobrak.

  132. E. C. Stedman and A. N. Easton, “History of the New York Stock Exchange,” in The New York Stock Exchange: Its History, Its Contribution to National Prosperity, and Its Relation to American Finance at the Outset of the Twentieth Century, ed. Edmund Clarence Stedman (New York: Stock Exchange Historical Company, 1905), 265.

  133. “The Week in Trade and Finance,” Nation 17 (September 18, 1873), 200; Oberholtzer, Jay Cooke, 427.

  134. “The Failures in Wall Street,” Commercial and Financial Chronicle 17 (September 20, 1873), 375; Horace White, “The Financial Crisis in America,” Fortnightly Review 19 n.s. (June 1, 1876), 815. For a detailed timeline of that September’s failures, see History of the Terrible Financial Panic of 1873 (Chicago: Western News Company, 1873).

  135. White, “Financial Crisis in America,” 815.

  136. O. M. W. Sprague, History of Crises Under the National Banking System (Washington, DC: Government Printing Office, 1910), 83.

  137. Fear and Kobrak, “Origins of German Corporate Governance,” 12.

  138. Jürgen Kocka and Marcel van der Linden, Capitalism: The Reemergence of a Historical Concept (New York: Bloomsbury, 2016), 16.

  139. Fear and Kobrak, “Origins of German Corporate Governance,” 12.

  140. Vincent Bignon and Clemens Jobst, “Economic Crisis and the Eligibility for the Lender of Last Resort: Evidence from Nineteenth Century France,” Center for Economic Policy Research vol. DP11737 (2017), 17.

  141. White, Railroaded, 83–84.

  142. U.S. Bureau of the Census, “Railroads Before 1890—Mileage, Equipment, and Passenger and Freight Service: 1830–1890,” in Historical Statistics of the United States, 1789–1945: A Supplement to the Statistical Abstract of the United States (Washington, DC: Government Printing Office, 1949), 200.

  143. White, Railroaded, 83.

  144. Nelson, Nation of Deadbeats, 173–74, 176.

  145. Eugene N. White, “The Krach of 1882, the Bourse de Paris and the Importance of Microstructure,” SSRN Electronic Journal (2006), 14–15, http://dx.doi.org/10.2139/ssrn.948993.

  146. Ibid., 14.

  147. Eugene N. White, “The Krach of 1882 and the Bourse de Paris” (presentation, Sixth European Historical Economics Society Conference, Istanbul, Turkey, September 2005), 13.

  148. White, “Krach of 1882” (2006), 20; Herbert R. Lottman, Return of the Rothschilds: The Great Banking Dynasty Through Two Turbulent Centuries (London: I. B. Tauris, 1995), 85.

  149. Cindy King, “Paul Gauguin (1848–1903),” Metropolitan Museum of Art, accessed November 5, 2018, https://www.metmuseum.org/toah/hd/gaug/hd_gaug.htm.

  150. Émile Zola, Money [L’Argent], trans. Ernest A. Vizetelly (London: Chatto & Windus, 1902), vii.

  151. Arthur F. Burns, The Frontiers of Economic Knowledge (Princeton: Princeton University Press, 1954), 199.

  152. Ibid., 311.

  153. U.S. Bureau of the Census, “Series P 231-300. Physical Output of Selected Manufactured Commodities: 1860 to 1970,” in Historical Statistics of the United States: Colonical Times to 1970, Part 2 (Washington, DC: Government Printing Office, 1975), 689–697, collected in Thayer Watkins, “The Depression of 1893–1898,” San José State University Department of Economics, accessed November 13, 2018, http://www.sjsu.edu/faculty/watkins/dep1893.htm.

  154. Elmus Wicker, Banking Panics of the Gilded Age (Cambridge: Cambridge University Press, 2000), 40.

  155. Douglas Steeples and David O. Whitten, Democracy in Desperation (Wes
tport, CT: Greenwood, 1998), 32.

  156. James L. Holton, The Reading Railroad: History of a Coal Age Empire, Vol. 1: The Nineteenth Century (Lewisburg, PA: Garrigues House, 1990), 323–25.

  157. “Come to Grief: Receiver Appointed for the National Cordage Company,” Farm Implement News 14 (May 11, 1893), 24.

  158. Robert Sobel, Panic on Wall Street: A History of America’s Financial Disasters (Washington, DC: BeardBooks, 1999), 258.

  159. U.S. Department of Commerce, “Table No. 328: Commercial Failures—Number and Assets and Liabilities,” Statistical Abstract of the United States 1937 (Washington, DC: Government Printing Office, 1938), 291.

  160. Steeples and Whitten, Democracy in Desperation, 21–22.

  161. Nelson, Nation of Deadbeats, 188; Barry Eichengreen, “The Baring Crisis in a Mexican Mirror,” International Political Science Review 20 (July 1999), 254; H. S. Ferns, “Investment and Trade with Argentina,” Economic History Review n.s. 3 (1950), 216. Eichengreen notes that new issues of Argentine debt in Britain fell 78 percent in the two years from 1888 to 1890; Ferns points out the value of wheat imported into Britain from Argentina in 1890 was only £114,282—about 2 percent of the roughly £6 million annual average for the ten years from 1884 to 1893.

  162. Steeples and Whitten, Democracy in Desperation, 84–85.

  163. Ibid., 88–89; The Daily News Almanac and Political Register for 1895 (Chicago: Chicago Daily News Company, 1895), 96. For more on the “Coxey’s Army” movement, see Donald LeCrone McMurry, Coxey’s Army: A Study of the Industrial Army Movement of 1894 (Boston: Little, Brown, 1924).

  164. Steeples and Whitten, Democracy in Desperation, 21–22.

  165. Charles R. Geisst, Wall Street: A History, Updated Edition (Oxford: Oxford University Press, 2012), 103.

  166. André Liesse, Evolution of Credit and Banks in France: From the Founding of the Bank of France to the Present Time (Washington, DC: Government Printing Office, 1909), 187.

  167. David Blackbourn, The Long Nineteenth Century: A History of Germany, 1780–1918 (New York: Oxford University Press, 1998), 313.

  168. Toni Pierenkemper and Richard Tilly, The German Economy During the Nineteenth Century (New York: Berghahn, 2004), 116.

  169. Arthur Raffalovich, Le Marché Financier, 1901–1902 (Paris: Librairie Guillaumin, 1902), 45.

  170. “Foreign Correspondence,” Economist 58 (December 15, 1900), 1776.

  171. “Foreign Correspondence,” Economist 58 (July 7, 1900), 955.

  172. “Foreign Correspondence,” Economist 58 (September 8, 1900), 1277.

  173. “Foreign Correspondence,” Economist 58 (November 3, 1900), 1540.

  174. “Foreign Correspondence,” Economist 58 (1900), 1818.

  175. Raffalovich, Le Marché Financier, 48.

  176. “Foreign Correspondence,” Economist 58 (October 27, 1900), 1504.

  177. “Foreign Correspondence,” Economist 58 (December 22, 1900), 1818.

  178. Ibid.

  179. Charles A. Conant, A History of Modern Banks of Issue, 5th ed. (New York: G. P. Putnam’s Sons, 1915), 707.

  180. “Germany’s Industrial Crisis,” Scientific American 85, no. 9 (1901), 130.

  181. Marty Tone Rodgers and James E. Payne, “Was the Panic of 1907 a Global Crisis? Testing the Noyes Hypothesis” (presentation, Financial Crises Past and Present, Indiana University, September 25, 2014), 6.

  182. Alexander D. Noyes, “A Year After the Panic of 1907,” Quarterly Journal of Economics 23, no. 2 (February 1909), 203.

  183. Nimura Kazuo, The Ashio Riot of 1907: A Social History of Mining in Japan, trans. Terry Broadman and Andrew Gordon (Durham, NC: Duke University Press, 1997), xi.

  184. “The Ashio Riots,” Japan Times, February 7, 1907, 3.

  185. Liesse, Evolution of Credit and Banks in France, 222.

  186. “Foreign Correspondence,” Economist 65 (September 7, 1907), 105.

  187. J. Riesser, The German Great Banks and Their Concentration, in Connection with The Economic Development of Germany (Washington, DC: Government Printing Office, 1911), 572.

  188. Noyes, “A Year After the Panic of 1907,” 200.

  189. Ibid., 207–8.

  190. Frank Fayant, “Fools and Their Money,” Success Magazine 10, no. 1 (January 1907), 9.

  191. Robert F. Bruner and Sean D. Carr, The Panic of 1907: Lessons Learned from the Market’s Perfect Storm (Hoboken, NJ: John Wiley, 2007), xvii; Ellis W. Tallman and Jon Moen, “Lessons from the Panic of 1907,” Federal Reserve Bank of Atlanta Economic Review 75 (May 1990), 7.

  192. Bruner and Carr, Panic of 1907, 151.

  193. Noyes, “A Year After the Panic of 1907,” 188.

  194. Bruner and Carr, Panic of 1907, 2.

  195. Quentin R. Skrabec Jr., H. J. Heinz: A Biography (Jefferson, NC: McFarland, 2009), 168.

  196. Stock exchange houses were private banks set up as partnerships, in which one or more partners is also a member of the NYSE, and were more common around the turn of the century. The following is a transcript from a hearing before the Senate Committee on Banking and Currency in 1914. Noted are Senator Henry F. Hollis, Democrat from New Hampshire, and John G. Milburn, a prominent New York attorney and a partner at the firm Carter, Ledyard & Milburn with prominent business clients. U.S. Congress, Senate, Committee on Banking and Currency, Regulation of the Stock Exchange: Hearings Before the Committee on Banking and Currency, 63rd Cong., 2nd sess., 1914, 362.

  “Senator Hollis: There is one other thing I am quite anxious to know. So far as I am informed, members of the stock exchange representing private banking houses are members of those houses as partnerships. That is, so far as I know, none of these banking houses is a corporation but is a partnership; is that so?

  “Mr. Milburn: Many banking houses have one or two partners who are members of the stock exchange.

  “Senator Hollis: They are stock-exchange houses, so called?

  “Mr. Milburn: Yes.

  “Senator Hollis: All those with which I am at all familiar are partnerships. Now, is there any rule about that in the stock exchange?

  “Mr. Milburn: A partnership which has a member who is a member of the stock exchange is a stock exchange house and its transactions on the exchange are subject to the jurisdiction of the exchange.”

  197. China’s crises are a subject that deserves a great deal more research and analysis, and there were indeed financial crises, as part of an almost continuous maelstrom of every sort of crisis—inflation crises, currency crises, and sovereign debt crises—for a century or more. The financial histories of almost all crises from the pre–World War II era are difficult to reconstruct, but China’s are especially difficult, with an accute scarcity of data in what was for most of this period a preindustrial and profoundly wartorn society. For much of this time, the country saw wars and rivalries—from the Taiping Rebellion, to the Boxer Rebellion, to the Xinhai Revolution, to the protracted struggle between Chiang Kai-Shek’s Nationalist Party and the Communist Party of Mao Zedong.

  China had a financial crisis in 1883 that emerged in the microeconomies that developed around the port cities the British had established, the so-called treaty ports, especially Shanghai. Stock market shares would crash after a panic, with the “average stock price decline . . . more than 70 percent for the 1883–84 period” (Zhiwu Chen, “Stock Market in China’s Modernization Process—Its past, present, and future prospects,” Yale School of Management, 2006, 12, http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.544.5311&rep?=?rep1&type?=?pdf). Few of the companies that were formed during the speculative mania leading to the crash would survive.

  The main lenders at the time were the qianzhuang, who were close to the Chinese merchants. They worked on the “chop loan” system, borrowing from foreign banks and lending to native ones. The presence of the qianzhuang “was so pervasive that almost all of the Chinese merchants then engaged in Shanghai’s foreign trade relied on qianzhuang loans” (Linsun Cheng, Banking in Modern China: Entrepr
eneurs, Professional Managers, and the Development of Chinese Banks, 1897–1937 [New York: Cambridge University Press, 2003], 16). The total chop loans were often several times higher than the native banks’ original capital, which created a very fragile capital structure and a complete vulnerability if a foreign bank were to call these loans (Zhaojin Ji, A History of Modern Shanghai Banking: The Rise and Decline of China’s Finance Capitalism [New York: M. E. Sharpe, 2003], 66).

  There was also a “mania for establishing native banks, and these in turn lent themselves to the starting of mines and other ventures, the result being so much excess that there was then a general collapse. Of some 60 or 70 banks of this nature which existed in Shanghai at the end of 1882 we learn that not more than 10 survived 1883” (“The Extent to Which Financially and Commercially We Are Interested in China,” Bankers’ Magazine 44 (1884), 1087–88).

  By the early 1900s, China was haltingly entering the industrial age, with the introduction of railroads, which were at first largely built, owned, and run by foreigners. Globally, in the late 1880s and early 1890s, bicycles would explode in popularity, leading to a high demand for rubber. This was closely followed by the creation and rise of the automobile industry in the early 1900s. In 1906, “Shanghai interests took to launching rubber estates on the local market.” Of course, this rapid growth wasn’t without misbehavior. In order to bring these estates to the market, “promoters were prepared to mislead investors, and in the subsequent inquest three companies admitted that there were discrepancies between the prospectuses and the actual conditions of the estates. On one estate ‘raw stumps were stuck into the ground and described as one year rubber’ ” (William Arthur Thomas, Western Capitalism in China: A History of the Shanghai Stock Exchange [Farnham, UK: Ashgate Publishing, 2001], 151–52). With what seemed like an infinite demand for rubber with the explosion of popularity of the automobile, issues were heavily oversubscribed, and there was a glut of people buying shares forward. “Some foreign banks also accepted mortgages on speculators’ property to lend them cash for the stock. . . . Many Shanghai native banks also oversubscribed to the stock” (Ji, A History of Modern Shanghai Banking, 93).